Careers: Taking the right steps

There can be few professional qualifications as internationally recognised or career paths as influential and intellectually challenging as that of an actuary. The statistics speak for themselves. Almost everybody who starts the actuarial exams already has a good mathematical degree. Yet the April 2010 exam pass rates were 56- for the Core Technical (CT) exams, 33- for the Core Application (CA), 41- for the Specialist Technical and 37- for the Specialist Application.

As recruiters, we occasionally take calls from graduates with a decent maths A-level who are trying to decide what to do with their lives and who have come across the term ‘actuary’ on Wikipedia. As most of the people reading this will know, the actuarial exams are not for the faint-hearted. The exuberance of twenty-somethings charging into their first big post-university challenge has often floundered at the prospect of spending years of one’s life sitting CTs, CAs and beyond.

The length and intensity of that baptism of fire (or ‘the pain’ as one actuary described it to us) is one reason that exemptions — gained through an undergraduate or postgraduate university course — have become an important tool for students plotting their way through exams. Mathematics and statistics courses often offer one or two exemptions to students who qualify with a strong class of degree. Specialised actuarial science courses offer as many as eight exemptions.

This is now becoming an issue. Specific attitudes to exemptions vary across the industry. However, in our view a disconnect has clearly emerged between the way exemptions are awarded and the attitude of employers towards them.

The most compelling evidence that something is amiss is the number of students who, following the completion of university-based actuarial courses, are then unable to confirm their abilities by passing exams via the traditional route. In the most extreme cases, we speak to individuals who have completed an undergraduate degree followed by back-to-back masters degrees, leaving them as ‘nearly qualified’ actuaries but with no industry experience. If they have been told this will make them attractive to employers, they’ve been misinformed.

Our concern is that, rather than being used to prepare potential actuaries for their professional lives, these courses are being used to short-circuit the training that makes the fellowship such a worthy and respected prize in the first place. We believe that a debate about exemptions in actuarial education is now overdue within the actuarial community.

Career optionsWhen it comes to joining the industry, what are the options? We divide the market into three broad sections: life, pensions and general insurance. Investment is often defined as a separate area; certainly, lots of actuaries end up working within the wider investment world (they occasionally turn up as fund managers). However, these are roles that individuals move into after gaining (or being close to gaining) the fellowship. If one wants to get into ‘investment’ in the early part of one’s actuarial career, that generally means occupational pension scheme investments, and involves joining an investment practice within one of the employee benefit consultancies.

There has been much hand-wringing about the long-term future of those consultancies. It’s ironic that in a world affected by such intense demographic flux, and where issues of mortality, retirement and retirement funding are set to become central themes of public policy across the globe, that the most highly trained technical specialists — pensions actuaries — find the appetite for their skills is not as robust as in recent decades.

Nevertheless, pensions consulting in the UK remains innovative, dynamic and worth hundreds of millions of pounds a year. In addition, it has been progressively solving the problem of pensions risk, one of the biggest issues facing UK businesses. That’s a pretty impressive achievement to have on one’s CV.

The past year has seen a number of company mergers — narrowing the field of first and second-tier employee benefit consultancies — reflecting the decline of defined benefit schemes. Mergers among insurers should cause less unease to those planning actuarial careers. Clive Cowdery’s view that there are too many second-tier life providers may or may not be borne out by business reality. However, the volume of life actuarial work generated by the UK (not to mention the global) economy is not about to decrease, no matter how few insurance companies that work is concentrated within.

Large or small?Another factor that should affect one’s choice of employer is size. In our view, smaller companies provide a greater diversity of work. Larger organisations may do a wider variety of things, but individual roles tend to be more specialised. It’s therefore easy for students to end up spending their formative professional years in just one or two areas (because, after you’ve worked for a year in that pricing team, you’re far too useful for the manager to let you leave).

One advantage of working for a large organisation is exam support. If you’re going to spend years studying for the actuarial exams, being surrounded by part- and fully qualified actuaries who understand what you’re going through represents the most sympathetic environment (both logistically and morally) in which to do it. Students at smaller, mainly non-actuarial organisations often complain that the need for study days isn’t taken seriously by their non-actuarial management teams (or that such study cannot be supported due to the organisation’s size). Pass rates suffer accordingly.

For students going into life or general insurance, a key decision is whether to work for a consultancy or a provider. Our view is that providers offer a more comprehensive training in the core actuarial skills of pricing, reserving, reporting and product development and so on — core skills that actuaries should seek to develop during the first phase of their career. However, for recent graduates, the lifestyle benefits of consultancy work (zooming off to clients in different cities) are considered attractive. Actuaries with family responsibilities, on the other hand, tend to find those implications distinctly less glamorous. Nevertheless, the consultancies are often perceived as at the intellectual cutting edge of the actuarial world, something which was highlighted during the early stages of the implementation of Solvency II, when their expertise came to the fore.

The bottom line in an actuarial career is that if you undertake mainstream work (be that pricing, reporting, valuations or modelling), maintain strong exam progress and have well-developed communication and interpersonal skills, then doors will open and opportunities will come your way, no matter which discipline or type of organisation you join.

ContractingAn option for actuaries at all levels is the contractor market, an area that has been expanding throughout 2010 as the credit crunch fades away and Solvency II builds momentum. Turning to contracting is generally very good for one’s bank balance but, in the case of students, bad for one’s exam pass rate. The ideal time to work as a contractor is shortly after gaining fellowship, when the financial recompense can be mouth-watering. However, for the truly ambitious (if, for example, you want to end up as a CEO, CFO or CRO of a major international company), contracting is unlikely to accelerate your progress up the career ladder.

That path is one of the most satisfying things about an actuarial career. There are a lot of big, interesting, strategic, international roles out there: actuarial function holders; risk managers; ALM roles in investment banks; directorships and partnerships in global professional services firms and, of course, all those top management positions at the insurance companies, which are filled with members of the actuarial profession.

In the coming decades, the number and scope of these roles will keep increasing, as the BRIC and tiger economies mature and the global financial system grows in sophistication and complexity. Understanding and modelling the world’s economy over the long term is something we’re just starting to get to grips with. It’s an area in which UK-trained actuaries can expect to play a central role. With the possible exception of Paul the psychic octopus of World Cup fame, their predictive skills lead the world. As a French actuary we know once said, “When things go wrong in Zurich, they call in the experts from London. When things go wrong in London, there is no one else to call”.

Another European consultant we know told us the story of meeting an insurer in Saudi Arabia. When they learned he was an actuary the client asked, ’So where is it that you are a fellow? The Institute or the Faculty?’ Now that’s international recognition.